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Derive the LM curve by taking into account of the liquidity trap. Explain your derivation Start from point A' above and consider decreasing levels of

Derive the LM curve by taking into account of the liquidity trap. Explain your derivation

Start from point A' above and consider decreasing levels of national income to derive the LM curve. Even after the equilibrium interest rate hits 0%, consider further decreases in national income to work out what happens to the LM curve

image text in transcribedimage text in transcribed
\fThe Liquidity Trap (end of conventional MP) M\" M5 MS' MS\" Interest ma, 1 icannot go no ow 0% the zero lower -.._._._. bound (ZLB) O B C Money

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